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Redistribution and stabilisation through the EU budget

Author

Listed:
  • Paolo Pasimeni

    () (European Commission, Directorate General for Economic and Financial Affairs)

  • Stéphanie Riso

    () (European Commission)

Abstract

This paper measures the capacity of the EU budget to operate two traditional functions of public finances: redistribution and stabilisation. It uses a large dataset covering all actual revenues and expenditures of the budget, over 16 years (from 2000 to 2015) in each Member State of the EU. It finds that, for every € 1000 difference in income per capita across the EU, € 9 is offset by lower contributions to the budget and € 3 is offset by higher expenditures by the budget; the overall equalising effect is small and mainly generated by the revenue side, in particular by the national contribution based on GNI and VAT. The budget is not particularly responsive to changing economic conditions: a fall in income per capita of € 1000 determines a reduction of € 8 in the per capita contribution paid to the common budget, while the expenditure side is irresponsive. The analysis also shows that the various corrections mechanisms applied over time to the revenue side of the budget have reduced its redistributive and stabilisation capacity.

Suggested Citation

  • Paolo Pasimeni & Stéphanie Riso, 2019. "Redistribution and stabilisation through the EU budget," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 111-138, April.
  • Handle: RePEc:spr:epolit:v:36:y:2019:i:1:d:10.1007_s40888-018-0136-0
    DOI: 10.1007/s40888-018-0136-0
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    References listed on IDEAS

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    Cited by:

    1. Nikolov, Plamen & Pasimeni, Paolo, 2019. "Fiscal Stabilization in the United States: Lessons for Monetary Unions," BoF Economics Review 6/2019, Bank of Finland.

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    More about this item

    Keywords

    European Union; Budget; Redistribution; Stabilisation;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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